Italy’s Rescue Fund Secures Monte dei Paschi Pledge, Reports Reuters

MILAN (Reuters) – Atlante, the fund established to rescue Italian banks, has successfully raised over 1.6 billion euros (approximately $1.8 billion) to purchase part of the distressed loan portfolio from Banca Monte dei Paschi di Siena.

The issue of problem loans, which total around 360 billion euros following a three-year recession, has emerged as a significant concern for investors regarding Italian banks. This situation has heavily impacted bank shares and has been a persistent challenge for the government.

Monte dei Paschi poses a risk to the broader Italian banking system, and many believe that finding a resolution to its troubles could represent a turning point in the banking crisis affecting the euro zone’s third-largest economy. This crisis has the potential to spread beyond Italy, especially in the wake of the UK’s decision to exit the EU.

Quaestio Capital Management, which oversees Atlante, announced that its new Atlante II fund has to date raised 1.715 billion euros, with a goal of reaching up to 3 billion euros by the end of September.

Plans are in motion to increase the total available funds to 3.5 billion euros by the end of July next year, according to Quaestio.

The Italian government initiated the creation of the Atlante fund in April, which collected 4.25 billion euros to support struggling lenders. However, over half of these funds were utilized to rescue two regional banks, necessitating additional fundraising efforts specifically designated for acquiring problematic loans from banks.

At the end of July, Monte dei Paschi, whose shares have plummeted by 80 percent this year, announced plans to offload 27.7 billion euros in bad loans as part of a comprehensive rescue strategy to alleviate concerns regarding its overall stability. As part of this initiative, Atlante intends to underwrite the sale of approximately 1.6 billion euros worth of the bank’s riskier loans.

Quaestio reported that several Italian financial institutions have committed to participating in the new Atlante II fund, though specific names were not disclosed. A source familiar with the situation indicated that a substantial portion of the remaining funds from Atlante’s initial fund has already been allocated to Atlante II.

The source also mentioned that while many parties expressed willingness to join the new fund, not all have formally committed yet. “They will do so by September,” the source added.